While in 2022 the oil market managed to offset the Western sanctions on Russian oil and petroleum products, it remains unable to find alternatives to the shortfall in oil production from the Persian Gulf. The outlook for late 2026 and 2027 therefore remains conservative, anticipating relatively high oil prices, averaging close to USD95/bl. Furthermore, despite prices being well below 2022 levels, the European natural gas market could come under strain this winter. EU stocks, which were replenished too slowly this summer, are at a record low. Without the return of Qatari LNG and faced with persistent Asian demand, the market is expected to remain tight in 2027.

Sustained high energy prices, higher and more persistent inflation, monetary tightening and rising interest rates: the outlook is therefore not encouraging, and yet growth is proving fairly resilient, albeit to varying degrees. 

In the US, for instance, the economy remains robust and is expected to continue to do so. Growth is forecast to remain in 2026 at the same level as in 2025 (2.1%) before slowing marginally to a still solid pace (2.0% in 2027). Specific favourable factors are, in fact, helping to overcome the shock caused by the war in Iran. Firstly, there is the very robust cycle of investment spending on AI, which is not yet showing any tangible signs of running out of steam. Secondly, there is the relative strength of the labour market. Although the labour market is less dynamic, net job creation remains fairly robust given the fall in the ‘break-even point’ resulting from changes to immigration policy, and points to the unemployment rate remaining virtually stable at around 4% until the end of the forecast horizon, at the end of 2027. Furthermore, while growth in hourly wages has slowed, constraints on the labour supply are limiting the extent of this decline. Another factor is the favourable stance of fiscal policy (the ‘One Big Beautiful Bill’). Finally, there is the net wealth of households, the sharp rise in which is boosting the wealth effect and, for the wealthiest households, cushioning the impact of shocks linked not only to inflation but also to rising interest rates. Contributing to high interest rates, headline inflation is expected to hover around 3.5% until Q127, before falling and dipping below the 2% mark after the summer of 2027, followed by a stabilisation around 2.3% by the end of 2027. On average, it is expected to reach 3.4% in 2026 and 2.3% in 2027.

With global growth forecast at 3.9% in 2026, the diverse group of emerging economies is also, on the whole, surprising in its ability to absorb shocks: this resilience is underpinned by the strength of domestic demand as well as exports of metals (energy transition, stockpiling), hydrocarbons and AI-related goods. In China, which is benefiting from the global cycle of investment in AI infrastructure, external demand for manufactured goods remains strong, but domestic demand remains weak. Despite the recovery in producer prices, inflation is rising only very modestly (forecast at around 1.0% in 2026 and 1.2% in 2027), suggesting that deflationary pressures persist. Assuming a gradual easing of monetary policy and an acceleration in fiscal spending, Chinese growth – although slightly revised downwards – is nevertheless expected to reach 4.5% in 2026 and 2027.

Finally, in the Eurozone, the negative impact of rising fossil fuel prices is offset by the positive impact of global investment spending in the tech sector, with benefits already evident for exports and potential benefits for investment. The recovery in foreign trade flows, which began in the summer of 2025, thus accelerated during H126; thanks to the strong contribution from net exports, GDP growth in Q2 significantly exceeded expectations and provided a 0.8% carry-over to the annual average for 2026. Domestic demand, primarily driven by household consumption, has strengthened slightly. While private consumption has once again appeared to defy the rise in inflation, thanks to the fall in the savings rate, questions remain as to its ability to absorb the expected erosion of purchasing power. In line with persistently high inflation (forecast to average around 3.0% in 2026 and again in 2027), our scenario anticipates a slowdown in private consumption between autumn 2026 and early 2027 but expects a gradual improvement in industrial investment, underpinned by a recovery in profitability. Thus, after 1.3% in 2025, the growth rate is expected to be around 1.0% in 2026, below the potential rate it is expected to approach in 2027 (1.1%), despite the expected dip at the turn of the year.

On the monetary front, rising energy prices, a resurgence in inflation and fears that inflation may accelerate and become more persistent: all these factors justify monetary tightening and the maintenance of a relatively cautious stance by the major central banks.

Having raised the Fed funds rate by 25bp in September, the Fedcould implement two further hikes in December and then in March, totalling 50bp, bringing the upper limit to 4.50%. In such a scenario, the Fed would undertake only a modest tightening cycle, consisting solely of reversing the 75bp of ‘insurance’ rate cuts implemented pre-emptively at the end of 2025. The Fed would then keep its rates unchanged and would only cut them by 50bp in Q427, provided that the easing of inflation is undeniable. Our scenario, which was hawkish before the summer, anticipated a rise in the ECB’s deposit rate from 2.50% to 2.75% in December, followed by a hold at that level until the end of 2027. This now accommodative scenario is, for the time being, maintained but is subject to a marked upside risk: the probability that the ECB will raise its rates above 2.75% has, very recently, increased significantly, with a risk of tightening as early as October.

In terms of interest rates, times are tough and there is no sign of a rapid respite. Rising energy prices, a resurgence in inflation, monetary tightening, widening budget deficits and mounting public debt: all these factors indeed justify a rise in interest rates[NM1] [LS2] .

The sharp rise already seen also signals that the uncertainty surrounding all these upward pressures – from the risk of escalation in the Middle East to concerns over fiscal trajectories – is taking its toll. Beyond the ‘objective’ reasons for the rise in interest rates, the lack of visibility is also proving costly. In the US, the correction in the bond market has accelerated in recent weeks, and investor apprehension has pushed up yields on Treasury securities across the entire yield curve. Yields are likely to rise until early 2027, and the flattening of the yield curve is set to persist until investors are convinced that the Fed is nearing the end of its rate-hiking cycle. In the Eurozone, it appears that markets are having to adjust to a structurally higher neutral rate. This raises the floor for short-term rates, reduces the scope for future easing cycles and, in the absence of a genuine recessionary shock, limits the appeal of long-term bonds. The notion of ‘higher rates for longer’ is keeping the 2Y swap rate within a narrow range of 3.55_3.60% and maintaining pressure on the long end of the curve: the 10Y swap rate is expected to reach 3.85% by the end of 2027, despite stabilisation at the short end. As for European government bond spreads, there is little cause for optimism: spreads appear tight given the simultaneous rise in inflation, rising interest rates – which are undermining the debt trajectories of the most indebted issuers – political risk and the 2027 election cycle. Barring an unexpected positive outcome on the Iran war front or very bad news on growth, no catalyst capable of triggering a tightening appears to be on the horizon. 

Finally, on the foreign exchange front, the USD is holding firm but without any adverse consequences. In a turbulent international climate, it is common for the USD to appreciate. However, its appreciation has not been severe enough to make the EUR extremely cheap or to undermine the major emerging-market currencies. The outlook remains slightly bearish for the EUR/USD, with a sustained recovery seeming unlikely before H227. Such a recovery would push the EUR towards 1.17 USD in Q427.